Five Minute Levy Guide

Five Minute Levy Guide

Separate the facts from the fiction and easily understand the Apprenticeship Levy. Our simple guide will help you get to grips with Levy calculations, payment methods, eligibility and tips on how to access your training funds.

What we’ll cover

Key facts

Why the Levy has been introduced

Paying into the Levy

Accessing Levy funds from your Apprenticeship Service Account

Support from Solvo Vir

Apprenticeship Levy Key Facts

The Apprenticeship Levy celebrated its first birthday in April 2018

Around 2% of employers in England are obligated to pay the Apprenticeship Levy

Recent changes mean that Levy-paying employers can make transfers of up to 10%

The option to pass on a portion of the Levy allows companies to support training in smaller companies, perhaps within their supply chain, to help them fund apprenticeships

Businesses pay the Levy to HM Revenue and Customs (HMRC) through the Pay as You Earn (PAYE) process

All businesses with an annual PAYE bill above £3m are required to pay the Levy

Any business paying into the Levy will be given an allowance of £15,000 per tax year to offset against any Levy payment made

Levy-paying employers who take on apprentices will receive further offsets in the form of monthly top-ups. For every £1 spent on training an apprentice, the government will apply a further 10% top up. This gives the value of £1.10 for every £1

Businesses with an annual wage bill less than £3m are still able to access subsidised apprenticeship training under different funding rules. They can also choose to register for the Levy scheme to benefit from the 10% top up payment

Funds available via the Apprenticeship Levy scheme only apply to English apprenticeships. Scotland, Wales and Northern Ireland operate their own apprenticeship programmes

As of January 2017, employers have had the opportunity to register for an online account and use this to pay for apprenticeship training

The development of apprenticeship standards is overseen by a new government body, The Institute for Apprenticeships.

Why has the Levy been introduced?

The Apprenticeship Levy was introduced in April 2017 with the objective to drive three million new apprenticeship starts by 2020. Alongside this boost in numbers, ‘The Trailblazer Initiative’ has also been working towards improving the quality of apprenticeship standards. The intention of this is to increase the subsequent uptake from employers.

The Levy gives employers more control over where and how money is spent on employee training, such as apprenticeships. It is applicable to employers in the UK with a PAYE bill (pay as you earn) of more than £3m per year These employers will be charged a Levy of 0.5% of their full UK payroll.

The Levy offers a way to raise the quality of apprenticeships throughout England and also increase the number of total apprentices. It is structured for the benefit of the employer; meaning that employers who offer apprenticeships and employee training opportunities can get more out than they put in.

Paying into the Levy

All employers with an annual PAYE bill of £3m are required to pay the Apprenticeship Levy. But what these employers are required to pay will be based on the total amount of earnings subject to Class 1 secondary NICs. Earnings include any employment remuneration or profit that an employer pays NICs on, such as: wages, bonuses, commissions, and pension contributions.

Put simply, employers pay the Levy on their entire PAYE bill at a rate of 0.5%. However, there is a Levy allowance to offset against this. The Levy allowance is worth £15,000 for each tax year.

Accessing Levy funds from your Apprenticeship Service Account

Apprenticeship Levy training funds are available to an employer through its Apprenticeship Service Account. These funds can be used for the sole purpose of employee training, apprenticeships and assessments, and only by employers in England. The apprenticeship service will also help employers find training providers to develop and deliver relevant apprenticeship programmes.

When an employer agrees to buy apprenticeship training from a particular training provider and once the apprenticeship has started, monthly payments will be automatically taken from that employer’s account and sent to the provider. This spreads the cost over the lifetime of the apprenticeship.

Because payments are taken on a monthly basis, employers simply have to ensure they have enough funds in their apprenticeship account each month, to cover their monthly costs. This means that when investing in apprenticeship training, employers do not need to have the total amount in their accounts straight away.

When an employer pays into the Levy each month, funds will start to accrue in their apprenticeship account. When they pay towards their training costs, they will see funds leaving the account in order to cover the monthly cost of this training. It is the responsibility of the government to make sure that funds leaving the account reach the training provider.

If employers choose not to use their account to buy apprenticeship training they will need to buy it directly from the training provider and follow the same process as those who do not pay the Levy.

Supporting employers that don’t pay the Levy

Non-Levy paying employers have the opportunity to negotiate and agree a price with their training provider. The agreed price will cover the delivery of apprenticeship training towards a specific standard, as well as the cost of assessment at the end of the training period. The payment will be covered through a co-investment with the government.

As part of our service to employers, Solvo Vir also offers an Apprenticeship Levy consultation process. We understand that the Apprenticeship Levy can appear to be a complicated process, which is why we strive to take the hard work out of the Levy, guiding employers through the required paperwork and calculations.

If you’d like to arrange a Levy consultation with our expert team, contact Solvo Vir today on 0330 0539140. We will guide you through the Levy process, help you work out your monthly contributions, and discuss training options for your employees.